Milk overproduction undermining prices

A “tsunami” of milk, enough to fill 400 miles of tankers stretched bumper to bumper from Edinburgh to London, is flooding the dairy industry and compounding the downward pressure on farmgate prices, industry figures said.

The average UK farmgate price for milk last year was 24.45 pence per litre (ppl), more than 7ppl less than the average in each of the previous two years, and the situation shows little sign of improving any time soon.

Arla has announced that it has frozen its price for its amba members for March and there is also little uplift expected across the sector because of a damaging combination of global factors.

The pressure on farmers across all sectors was discussed at the annual NFU conference in Birmingham. During a session on dairy, market analyst Chris Walkland told of how there was an extra 1.2bn litres of milk being produced since quotas ended – the equivalent of 45,500 full tankers.

He said that dairy prices were currently at 60-70 per cent of where they need to be for most dairy farmers.

The NFU’s dairy board chairman Rob Harrison said the industry needed to adapt to the volatility.

He said: “We need to have better relationships than ever with our milk buyers. The only way I can see us align supply with the market is by mature producer organisations.

“What we have to do is have mature relationships to work closer together. Our next priority is over milk contracts.”

He urged all dairy farmers to talk with their milk buyers.

There is support from shoppers, said Sian Davies, the NFU’s chief dairy adviser, and they want British dairy farmers to survive the current downturn.

Ms Davies said: “Consumers want British dairy. Their support for British farming and dairy farming has been clear. They are willing to pay more for British dairy.

“The Morrison’s Farmers Initiative has been positive and it shows that consumers are willing to back dairy.”